Emirates REIT
A group of Emirates REIT creditors has rejected a proposal to exchange $400 million of sukuk securities for new notes. Image Credit: Gulf News archives

Dubai: A group of Emirates REIT creditors has rejected a proposal to exchange $400 million of sukuk securities for new notes and said they have the numbers to block it.

In a statement on Wednesday, the certificate-holders said their position was communicated to the company and asked for a meeting the following day "to discuss the concerns of the Ad-Hoc Group and its requirements for the restructuring process." Rothschild & Co. and Clifford Chance are advising the group.

The creditors formed a so-called steering committee that includes several certificate-holders with large exposure to lead the talks with Emirates REIT, according to a separate document seen by Bloomberg. The steering committee consists of Aberdeen Standard Investments Ltd, GFH Financial Group, Sancta Capital, Shuaa Capital PSC and Oasis Management Co Ltd, the document showed.

The Shariah-compliant real estate investment trust last week offered to exchange the unsecured sukuk securities due in 2022 for new secured notes maturing in 2024. Under the plan, the REIT's coupon payments would be deferred for a year and be paid at maturity. The existing sukuk's 5.125% rate is to be maintained.

The proposed transaction would represent "a material reduction in terms for lenders and is therefore viewed" as a distressed debt exchange, according to Fitch Ratings, which downgraded the Dubai-listed REIT to near-default status on Monday.

Emirates REIT has said it needs to improve its balance sheet after the global pandemic compounded a property slump in Dubai.

The REIT last year hired Houlihan Lokey Inc. as an adviser to help it review its options and has been considering a potential delisting from Nasdaq Dubai. It's also said that the Dubai Financial Services Authority is investigating matters connected to its management.

The group of dissenting creditors said it represents a blocking majority to the offer and includes 13 institutions, with investors from the Gulf region, Europe, North America and Asia, alongside banks from the United Arab Emirates. It set out a list of conditions to develop a revised proposal, saying it would have to address issues ranging from governance to management fees and operating costs.

"The Ad-Hoc Group is prepared to work to reach a quick and efficient resolution," it said in the statement.

Company claims support of sukuk holders
The voting remains open for sukuk holders to respond to the Consent Solicitation Process. Of the votes cast so far, a significant majority have voted in favour of the deal, Emirates REIT said in an emailed statement.
"As explained in the consent solicitation memorandum (CSM), this is a voluntarily proposed deal that is designed to provide sukuk holders with enhanced tradability and security that they do not have today by allowing a dollar for dollar exchange from unsecured sukuk to secured sukuk while maintaining the profit rate.

The Company has the liquidity to pay the profit payment due in the second week of June should it be required; and, through the voluntary consent solicitation, the company aim is to provide for a better rationalisation of the capital structure while accommodating the long-term aims and concerns of its stakeholders."